The Act applies to married couples after their “determination date.” The determination date is the last of the following to occur: 1) marriage; 2) both spouses are domiciled in Wisconsin; or 3) January 1, 1986.
MPA are also known as prenuptial or postnuptial agreement which are used to determine how property will be split in the event of a divorce. Many couples use the MPA to protect one spouse’s assets from the other spouse’s creditors. Especially, if that spouse had a lot of debt before they got marriage and brought the debt into the marriage. However, any debt acquired during marriage is presumed to be marital debt, because it was incurred in the interest of the marriage.
Countless times couples have tried to keep individual property during their marriage only to find out that it has become jumbled together during their marriage. The court will presume those assets jumbled together to be marital property, without a MPA. It is very important to use a MPA to determine what assets belong to what spouse, keep the assets separate, and with a paper trail showing the values before marriage.
A MPA may be used to determine how the property will be distributed upon your death. MPA can be very useful if you are married for a second time and have children that you want to provide for from the first marriage. If you have children from a previous marriage an agreement will allow you to disperse unequal shares of your assets to your children from the previous marriage. If you allowed your assets to be distributed according to your Will your current spouse could contest the Will to obtain their marital share (50%).
Also, if done properly a MPA will make sure that your assets avoid Probate court by giving the assets directly to your beneficiaries or funding your Trust after you pass away. Remember Last Will and Testaments are meant to take your assets to probate court, if the assets do not have a beneficiary. A MPA is like a substitute Will in Wisconsin, but it make sure your assets do not end up in Probate court. This is called a “Washington Will.”
Beside the advantage of avoiding probate, there are tax advantages when a couple opts-in. One of the tax advantage is at the time of death, the basis of the assets passing from a decedent for determining gain or loss for income tax purposes is either a stepped-up (gain) or a stepped-down (loss) to an amount equal to the fair market value of the assets as the date of death. Example: House was purchased for $200,000.00. Owner passed away and the house was valued at $350,000.00 at the date of death. There is a capital gain of $150,000.00. With a MPA the beneficiaries take the house at the fair market value of $350,000.00, get a stepped-up value, and do not pay capital gains.
MPA may also be used if one of the spouses enters the nursing home. The spouse still living at home might not want the spouse in the nursing home to receive all the assets if they were to pass away. Especially, if the spouse in the nursing home is on Medicaid. The spouse at home can dictate that their individual property go to a different beneficiary and part of the marital property goes to a different beneficiary and not the spouse in the nursing home. The spouse in the nursing home will still need to take their marital share of their spouse’s assets, so that they do not lose their Medicaid benefits.
MPA can be used in many types of estate planning - from dividing up property, protecting property from creditors, distributing property unequally in a second marriage, avoiding probate, and transferring assets away from a spouse in the nursing home. Each of these types of planning requires specific language that can be accomplished with a properly drafted Marital Property Agreement.